Fisk Electric Company v. DQSI, L.L.C.

Case: 17-30646 Document: 00514538481 Page: 1 Date Filed: 07/02/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 17-30646
Fifth Circuit
FILED
July 2, 2018
FISK ELECTRIC COMPANY, Lyle W. Cayce
Clerk
Plaintiff – Appellee,
v.
DQSI, L.L.C.,
Defendant – Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:15-CV-2315
Before KING, ELROD, and GRAVES, Circuit Judges.
PER CURIAM:*
This appeal concerns the denial of a motion under Federal Rule of Civil
Procedure 54(d) for attorneys’ fees and related costs. A subcontractor
performed electrical work for a general contractor on a post-Hurricane Katrina
federal construction project. The subcontractor later sued the general
contractor in federal district court for fraudulently inducing it into entering a
settlement agreement releasing the general contractor from liability under the
* Pursuant to Fifth Circuit Rule 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited circumstances set forth
in Fifth Circuit Rule 47.5.4.
Case: 17-30646 Document: 00514538481 Page: 2 Date Filed: 07/02/2018
No. 17-30646
Miller Act—a federal statute that requires general contractors to secure
payment to subcontractors on most federal construction projects. In a related
appeal, 17-30091, Fisk Electric Co. v. DQSI, L.L.C. et al., we reversed the
district court’s grant of summary judgment to the general contractor, holding
that there is a genuine issue of material fact on the subcontractor’s claim for
fraudulent inducement into the settlement agreement. Here, the general
contractor appeals from the district court’s judgment denying its post-
summary-judgment motion for attorneys’ fees and related costs. Because we
reversed and remanded for further proceedings in the related summary-
judgment appeal, we VACATE and REMAND in the instant appeal, as well.
I.
DQSI, L.L.C., the general contractor here, contracted with the United
States Army Corps of Engineers to perform work on a post-Hurricane Katrina
pump station construction project. DQSI subcontracted with Fisk Electric
Company; Fisk was to perform electrical work on the project. The subcontract
allowed Fisk to assert claims for money damages for unforeseen delays not
caused by Fisk. The project was delayed over a year, and Fisk sought delay
damages. Fisk alleges it was never paid.
After filing a lawsuit against DQSI, Fisk and DQSI entered into a
settlement agreement. As part of the settlement, Fisk and DQSI agreed to
various mutual releases of liability. In consideration of the releases, DQSI
agreed to submit to the Corps a “Request for Equitable Adjustment” requesting
delay damages on Fisk’s behalf. (As a subcontractor, Fisk had no direct
relationship with the Corps.) Fisk contends that DQSI assured it that such a
request was still viable and that, based on these representations, Fisk agreed
to settle the lawsuit. According to Fisk, DQSI knew at the time of settlement
that no such request for delay damages was possible because DQSI had
previously waived Fisk’s right to seek the delay damages. Fisk sued DQSI and
2
Case: 17-30646 Document: 00514538481 Page: 3 Date Filed: 07/02/2018
No. 17-30646
DQSI’s surety to rescind the settlement agreement based on fraud and to
recover delay damages under the Miller Act. 1 Fisk also asserted breach of
contract and unjust enrichment as alternative claims.
The district court granted summary judgment to DQSI, holding that
there was no genuine issue of material fact on the element of justifiable
reliance in Fisk’s fraudulent-inducement claim. DQSI then requested an
award of attorneys’ fees and related costs based on the subcontract under
Federal Rule of Civil Procedure 54(d)(2), but the district court denied this
motion. 2 The district court first determined that the settlement agreement,
not the subcontract, governed the current relationship between the parties.
The district court then concluded that because the settlement agreement “does
not allow for an award of attorneys’ fees,” DQSI’s motion for attorneys’ fees
failed. In addition, the district court determined that Fisk’s lawsuit “was not
baseless or vexatious and DQSI should not be awarded attorneys’ fees based
on equity.” In light of “convincing evidence of questionable business practices
that are against the public’s interest,” the district court denied DQSI an award
of attorneys’ fees. Thereafter, DQSI timely appealed.
II.
“Awards of attorneys’ fees are generally reviewed for abuse of discretion,
but application of the correct legal standard is reviewed de novo.” United
States ex rel. Varco Pruden Bldgs. v. Reid & Gary Strickland Co., 161 F.3d 915,
1 40 U.S.C. § 3131, et seq. “The Miller Act requires general contractors on most federal
construction projects to furnish a bond for performance and to secure payment to all suppliers
of labor and materials.” J.D. Fields & Co. v. Gottfried Corp., 272 F.3d 692, 696 (5th Cir.
2001).
2Rule 54(d)(2) concerns claims for attorneys’ fees and “related nontaxable expenses,”
and generally requires a party to request such fees by motion. Fed. R. Civ. P. 54(d)(2)(A). By
contrast, Rule 54(d)(1) concerns costs “other than attorney’s fees” and generally provides that
these costs should be “allowed to the prevailing party.” Fed. R. Civ. P. 54(d)(1).
3
Case: 17-30646 Document: 00514538481 Page: 4 Date Filed: 07/02/2018
No. 17-30646
918 (5th Cir. 1998). “Whether a party is a ‘prevailing party’ entitled to fees is
a legal question that the court reviews de novo.” Tina M. v. St. Tammany Par.
Sch. Bd., 816 F.3d 57, 59 (5th Cir.) (quoting Davis v. Abbott, 781 F.3d 207, 213
(5th Cir. 2015)), cert. denied, 137 S. Ct. 371 (2016). We review a denial of
attorneys’ fees provided by contract for abuse of discretion. McDonald’s Corp.
v. Watson, 69 F.3d 36, 45 (5th Cir. 1995). “The district court abuses its
discretion if it awards contractually-authorized attorneys’ fees under
circumstances that make the award inequitable or unreasonable or fails to
award such fees in a situation where inequity will not result.” Id. at 45–46.
III.
“It is undisputed that attorneys’ fees can not be awarded in Miller Act
claims absent an enforceable contract provision or evidence of bad faith.”
Varco Pruden Bldgs., 161 F.3d at 918; see also F.D. Rich Co. v. United States
ex rel. Indus. Lumber Co., 417 U.S. 116, 126–31 (1974). “The so-called
‘American Rule’ governing the award of attorneys’ fees in litigation in the
federal courts is that attorneys’ fees ‘are not ordinarily recoverable in the
absence of a statute or enforceable contract providing therefor.’” F.D. Rich Co.,
417 U.S. at 126 (quoting Fleischmann Distilling Corp. v. Maier Brewing Co.,
386 U.S. 714, 717 (1967)). “[A]ttorney’s fees, as an element of damages, are a
matter of substantive state law.” Gulf Union Indus., Inc. v. Formation Sec.,
Inc., 842 F.2d 762, 766 (5th Cir. 1988). Under Louisiana law, attorneys’-fee
awards are allowed when authorized by statute or contract. See La., Dep’t of
Transp. & Dev. v. Williamson, 597 So. 2d 439, 441 (La. 1992). “Where
attorney’s fees are provided by contract, a trial court does not possess the same
degree of equitable discretion to deny such fees that it has when applying a
statute allowing for a discretionary award.” Cable Marine, Inc. v. M/V Trust
Me II, 632 F.2d 1344, 1345 (5th Cir. 1980). “Nevertheless, a court in its sound
discretion may decline to award attorney’s fees authorized by a contractual
4
Case: 17-30646 Document: 00514538481 Page: 5 Date Filed: 07/02/2018
No. 17-30646
provision when it believes that such an award would be inequitable and
unreasonable.” Id.
Here, DQSI contends that there is an enforceable contract providing for
an award of attorneys’ fees and related costs—the subcontract. Article 23(H)
of the subcontract provides that the prevailing party in an action to enforce
any provision of the subcontract or in an action alleging breach of the
subcontract shall be entitled to reasonable attorneys’ fees, court costs, and
costs of appeal. 3 In its order denying an award of attorneys’ fees, the district
court reasoned that “[e]ven though the lawsuit in question was based on an
alleged violation of the subcontract, which allowed for attorneys’ fees, the
Court’s Summary Judgment decision affirmed the validity of the parties[’]
previously reached settlement agreement.” Because it determined that the
settlement agreement addresses all potential claims, does not provide for an
award of attorneys’ fees, and is “the controlling agreement” between the
parties, the district court concluded that DQSI was not entitled to an
attorneys’-fee award.
Because we reversed the grant of summary judgment to DQSI in the
related appeal, Fisk may proceed to trial on its claim for rescission of the
settlement agreement based on fraudulent inducement. DQSI is no longer a
prevailing party at this stage of the litigation. See Tina M., 816 F.3d at 60
(stating that to be a prevailing party, a litigant must “receive at least some
relief on the merits of his claim” (quoting Buckhannon Bd. & Care Home, Inc.
v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 603 (2001))). Given that
the district court denied DQSI an attorneys’-fee award in part because of its
decision upholding the validity of the settlement agreement—and because of
our determination in the related appeal that summary judgment was not
3 The subcontract states that Louisiana law governs its provisions.
5
Case: 17-30646 Document: 00514538481 Page: 6 Date Filed: 07/02/2018
No. 17-30646
warranted—any consideration of attorneys’ fees and related costs here is
premature. 4
Accordingly, we VACATE and REMAND to the district court for further
proceedings.
4 We do not hold that the district court abused its discretion in denying DQSI an award
of attorneys’ fees after granting summary judgment to DQSI. The district court declined to
award attorneys’ fees to DQSI in part because of “convincing evidence of questionable
business practices that are against the public’s interest.” Even assuming arguendo that the
subcontract’s provision regarding attorneys’ fees governed the relationship between Fisk and
DQSI at the time of the district court’s order, “a court in its sound discretion may decline to
award attorney’s fees authorized by a contractual provision when it believes that such an
award would be inequitable and unreasonable.” Cable Marine, 632 F.2d at 1345 (affirming
a decision denying plaintiff attorneys’ fees where plaintiff may have “incurr[ed] needless
expense” by rejecting a generous settlement offer and continuing to pursue litigation).
Moreover, the presumption that a prevailing party is entitled to costs does not extend to
attorneys’ fees. Cf. Fed. R. Civ. P. 54(d)(1) (“Unless a federal statute, these rules, or a court
order provides otherwise, costs—other than attorney’s fees—should be allowed to the
prevailing party.” (emphasis added)). Compare 10 Charles Alan Wright et al., Federal
Practice & Procedure § 2675 (3d ed.) (stating that “counsel fees ordinarily are not taxable as
costs”), with 10 Charles Alan Wright et al., Federal Practice & Procedure § 2668 (3d ed.)
(stating that “in most instances a person who succeeds in a lawsuit will be deemed a
prevailing party and be entitled to have his or her costs paid by the losing party”).
6